All men’s miseries derive from not being able to sit in a quiet room alone. – Blaise Pascal

Posted by: donmihaihai | January 1, 2009

Reflections on 2008

What was my mistake in 2008? So far the answer is no. No major mistake yet BUT there are 2 potential mistakes as of now. The 1st is BrightWorld and 2nd is Sarin. The things about BrightWorld are management and cashflow while Sarin is paying a high price. Let see if any of them will become my mistake in 2009.

While STI slump 49% as reported in the news, some of the individual stock did even worse and it happened that I hold quite a number of them. Stock like TPV declined 83% from $1.04 to $0.18 before a silence rally of 150% and lifted back to $0.45. That is still a declined of 57%. It really looks crazy as TPV is certainly nothing speculative with NPAT of US$180 million, NTA of US$880 million and being the largest assembler of LCD monitor. At $0.18, the market was giving TPV the value of $354million, less than 1.5X FY2007 earnings. At $0.45, the market was giving TPV the value of $884million, less than 3.5X FY2007 earnings. That means TPV was valued at about 8X FY2007 earnings at the beginning of the year.

Another stock that did far worse is Jaya declined 85% from $1.90 to $0.285. The lowest was $0.255. At $0.285, Jaya is having a market value of S220 million where it FY2008 earnings was $150million and NTA was $439million. This also means that Jaya is currently trade at less than 1.5X FY2008 earning and 0.5X NTA. This also means that Jaya was valued at about 10X FY2008 earnings and 3.3X NTA at the beginning of the year.

Other than that, Sarin declined 76%, Beauty China declined 71%, Full Apex declined 71%, Celestial declined 64% and Bright World declined 51%. All these did worse than STI. Because of their declined, new purchases and added on, the future is super bright as all my holdings are selling at 1.5X to 8X earnings. In fact, 7 of my holdings are selling below 5X earnings.

The bright sides for 2008 were buying stocks as it got cheaper and cheaper. This is the joy of investor or rather value investor. We love to buy cheap and it doesn’t matter how big is the unrealised losses at the interim. Realised profit and loss is important and in 2008 I was extremely lucky to make very good realised profit mainly from takeover activities for Midsouth and SP Chems and selling half of Beauty China at a very good price. 2008 was the 7th years that I make consistent realised profits and the only year I didn’t achieved that is 2001. Consistence is a dirty word but I still hope to do it again in 2009.

What I learned in 2008 that worth mention is there is a need for me to control my excitement. When the price decline, especially if I am holding on to that stock, the 1st thing that comes into my mind is “what is the valuation” or “How cheap”. And I will get excited when knowing the answer is “cheap” and usually will try to purchase some. Excitement can make me loss control and buy too much. While this is not as evil as fear in the same situation, “control” , “measure” or “balance” should be the way.

2008 was the year where I found that I can live without looking at the stock price at least once daily. Before that it was just a habit because there is no need for me to look at the stock price daily and I don’t even remember the exact price of my holdings. What made me kick away this habit? Because it is very painful to see stock selling so cheap while I am unable to buy. Haha so this helps me to kick away a habit that was with me for since I start buying stocks.